The EUR/USD pair initially had a very positive day during the Monday session as the markets reacted positively to the meeting between Sarkozy and Merkel. The meeting was successful in producing an overall concept of a fiscal union, and would be presented at the EU summit on Friday. The consensus was that this is the first real step towards a solution. However, during the American afternoon, the entire 15 nations in the Euro currency have been rumored to be put on credit downgrade watch from the ratings agency S&P. The fact that the agency neither confirmed nor denied this is particularly troubling. Looking at the charts, the 1.35 level still seems to be massive resistance as the day fell just short of breaking it yet again. This is the fourth day in a row where the currency pair attempted to break the level, so the ferocity is well noted. The breaking of that level would be a massively bullish signal, and at that point we would have to be long this pair. For the downside, we still see the 1.31 level as an area that should continue to put up a fight for the bulls. The selling down to that level looks ready to happen, as the daily candle for Monday looks like another shooting star in this pair, and the next move could very easily be down. The breaking of the lows on Monday would have us selling. The pair will continue to be choppy at best, and quite frankly – one of the more dangerous ones to be bothered with. The headline risk is simply far too great in both directions at this point. With this in mind, we are looking for further weakness, but in a choppy manner. We see 1.31 as the floor currently, and would be quick to take profits if we approach that level. The trend is down, and we think that it will continue to fall every time it rises. Selling the rallies in the short-term has been the way to go, and we think it shall continue to be.

EUR/USD Forecast Dec. 6th, 2011, Technical Analysis

EUR/USD Fundamental Analysis for Dec. 6, 2011

The EUR/USD started an upbeat week on Monday with the eyes all concentrated on what lays ahead in the week from the ECB and EU summit which are both expected to deliver good outcomes and support to stem the crisis where the new austerity package from Italy and Merkel and Sakozy’s agreement on a new plan bolstered the confidence. The week started after the Italian government approved a 30 billion euro austerity and growth package and Monti on Monday presented the package to both houses of Parliament for approval which supported the sentiment that Italy is doing its homework to escape the crisis that sent its borrowing costs to records high. As for Merkel and Sarkozy they said they have reached agreement on the plan to help end the crisis and on the fiscal integration that is hoped to be for all the EU and still open to be for the euro area which will see strict oversight over the breach of fiscal rules in the Stability and Growth Pact which they will present to the European Commission President this week and they will surely address the EU with it in Brussels. Hopes that Europe is moving towards bigger steps to stem the crisis and the use of greater tools like the IMF this week is helping ease the tension and supporting the return of the risk appetite in the market. We still expect this sentiment to pickup pace this week and gains to be seen still for the euro unless they disappoint again which will surely trigger a massive selloff to the end of the week. As for the data on Tuesday, the euro zone will start the session at 10:00 GMT with the GDP figures for the third quarter in a preliminary reading, where the quarterly and annual seasonally adjusted indexes could have lingered at 0.2% and 1.4% respectively, noting that the Household Consumption index previous reading was 0.2% drop, while the Gross Fixed Capital was at 0.2%, in the time Government Expenditures dropped by 0.2% previously. Germanywill join the session at 11:00 GMT with the Factory Orders index for October, where the annual non-seasonally adjusted index could have expanded by 1.8% compared with the previous expansion of 2.4%, while the monthly seasonally adjusted index is predicted to expand by 1.0% from the previous drop of 4.3%.

USD/JPY Technical Analysis for Dec. 6, 2011

USD/JPY fell during the Monday session as the 78.00 level acted as a massive resistance barrier to the pair. The pair has been decidedly bearish as of late, and unless the Bank of Japan is intervening, this pair is either sideways or down in direction. The pair can’t be bought until we break above the all-important 80.00 level, and as that being the case – we only sell rallies at this point. There have been several interventions by the Bank of Japan lately, and every time it happens, the market will simply fade those moves. The whole pair is set up as such: to sell any pops in price. The trend has been viciously to the downside since the financial crisis of 2008, and should continue to have massive headwinds to any serious attempt to the upside. The pair has a definite trading range form the 76 handle up to the 80 handle, and we will continue to trade it as such. The higher we get, the more interested we are in selling this pair as the moves simply do not have the strength to continue above that 80 level. If we ever do, we would become buyers, but that seems to be very far down the road. We like selling rallies, especially ones that are over 50 pips as it gives us a decent amount of room from which to trade. However, we are not keen to hang onto trades for too long as the 76 level has seen a couple of interventions recently, and we do not want to be on the wrong side of a central bank intervention. There are few things that can wipe your account out quicker than that mistake. Because of this, we sell, but are willing to take 50 – 100 pips at a time, and then wait for another thrust higher form which to sell again. Someday we will be proven wrong as this pair finally gets traction to the upside, but until then – we are willing to continue with this strategy as it has served us so well.

USD/JPY Forecast Dec. 6th, 2011, Technical Analysis

USD/JPY Fundamental Analysis for Dec. 6, 2011

The USD/JPY pair retreated with the beginning of the week after it reached its highest level in four weeks during last week. The Japanese currency is trying to gains some momentum against the dollar after its lost ground against other major. The euro and other major currencies advanced against the yen, as the new Italian prime minister announced a plan to cut the nation's debt where the cabinet approved the 30 billion euros austerity and growth measures and now going to the parliament. The new Italian plan helped risk appetite to control the FX market, and pushed the European currencies to advance against the dollar and the yen, as demand increased for higher-yielding currencies. On the other hand, the U.S. unemployment rate retreated to 8.6% during November, which is better than the previous and the expected reading of 9.0%. Where the optimistic data fueled the risk appetite and forced the dollar to dropped against most of its major counterparts. Both economies will not release any fundamentals on Tuesday, where the pair's movements will depend on the market sentiment.

GBP/USD Technical Analysis for Dec. 6, 2011

GBP/USD had a back and forth session on Monday as traders first bought it up, and then sold it off. The main reason was the fact that the meeting in Europe between Sarkozy and Merkel produced what was called a framework for fiscal union, and a new treaty for the EU. The afternoon in America saw the S&P ratings agency put 15 of the countries in the EU on “Credit Watch Negative”, and this deflated the gains that the Euro saw. The Pound lost ground simply because of the fact that the two economies are so intertwined. The UK sends 30% of its exports to the EU, and this will impact the GDP of the UK in a strong way if the EU falls into recession, or has a meltdown. The EU is also where a lot of UK banks have their cash parked. The banks in the UK are knee-deep in the mess on the continent. The GBP/US is also a “risk on” trade, and the Dollar got a bid in the afternoon all around. The resulting candle is a shooting star and the top is sitting right at the 1.57 handle. This shows that perhaps we are seeing more pressure to the downside in this pair as the bounce has just been sold. The 1.55 level underneath is support, and that support runs all the way down to the 1.53 level. With all of this in mind, we are selling rallies in cable. The breaking below the lowest levels from the Monday session will send more sellers into the market, and should see at least the 1.55 level. The bearishness could continue down to 1.53, but that level has acted as extremely tough support. The breaking below that level would send this pair much lower, and would without a doubt have us looking for 1.50 before it is all said and done. We won’t buy the pair as there are simply far too many risks involved in selling the safest of all currencies right now, the US dollar. Because of this, we are very patient and willing to wait until the Pound rises in order to keep buying Dollars.

GBP/USD Forecast Dec. 6th, 2011, Technical Analysis

GBP/USD Fundamental Analysis for Dec. 6, 2011

The better than expected PMI services from the United Kingdom in November helped sterling sustain further gains against the dollar which was further supported by the prevailing risk appetite in the market. The data from UK eased the woes over the state of the economy and the extent of damage from the spreading debt crisis that worsened in the past period, where the expansion in the critical sector eased the fears over the recession spreading rapidly to the United Kingdom and further pinned that the BOE will not take action this month on the APF. We can still see high volatility for the pair as it remains very vulnerable to the market sentiment and on Tuesday we expect sterling to continue to trade inline with the prevailing trend for risky assets and as the sentiment improves the pair will be able to extend the gains, though trading will likely remain choppy. The lack of data from both the United Kingdom and the U.S. will keep the European debt crisis the main topic and as investors’ sentiment improves further on hope that Europe this week will take decisive action the odds will continue to favor sterling for further gains. Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.

USD/CHF Technical Analysis for Dec. 6, 2011

The USD/CHF pair had an extremely quiet session on Monday as traders seem to be waiting for the results of the EU summit at the end of the week. The Franc has traditionally been a “safe haven” currency, but with the recent actions by the Swiss National Bank, the ability for traders to buy the currency has been severely impacted. The Dollar is the lone “safe haven” at the moment, and as a result it has a bit of a built in bid in these types of markets. Switzerland’s biggest problem right now is Europe, which is by far its largest export market. With your customers not being able to afford your goods, this is bad news to say the least. The pair has had signs of massive support in the 0.9000 level, and this should continue in our minds as the SNB is willing to get involved when the markets buy far too many Francs. The last couple of sessions have seen green candles, and even a hammer that suggests that the market wants to get long. A breaking of the recent highs at the 0.93 level would be massively bullish in this pair. The 0.95 level is the next target if we can get through there, and the parity level would be next. The fact that you really can’t buy the Franc without fear of intervention makes this trade a one-way affair. The selling of this pair could be a quick way to find losses in this market, and as a result we continue to buy the dips as long as we can maintain a level above the 0.90 handle. The 0.85 level is roughly where the intervention talk from the Swiss National Bank sent this pair previously and we see that level as the “ultimate bottom”. We will continue to look to the shorter-time frames for dips that we can buy in this pair. If we get above the recent highs, we could see a long-term buy and hold trade form in this pair as the Swiss continue to work against their currency.

USD/CHF Forecast Dec. 6th, 2011, Technical Analysis

USD/CHF Fundamental Analysis for Dec. 6, 2011

The USD/CHF started the week with a tight movement with a slight downside bias as the franc did not extend heavy gains versus the dollar as the risk appetite improved and investors head to riskier and higher yielding assets which left the pair little support to rally. The franc is not a favored this period, it is weakening inline with risk assets against a strong greenback yet doesn’t rally in the opposite direction as the SNB’s readiness and willingness to take action against the gains have depressed its appeal as a risky asset and also devalued its haven status. Surely the sentiment was in better shape with the start of the week after Italy announced a new austerity package and Merkel and Sarkozy agreed on a plan for tighter fiscal integration to prevent the crisis from returning in the future and prepare the framework now for more action to end the crisis. Thos actions supported the overall market sentiment and that kept the general bias in the market against the dollar. On Tuesday more volatility is expected for the pair the main event will be the Swiss inflation data as further signs of deflation will be the trigger to markets to start pricing a new move from the SNB and can further weaken the franc. As of 08:15 GMT, the Swiss economy will release CPI for Nov. where the reading is predicted to record -0.4% from the prior -0.1% on the year while rise to 0.0% from the previous -0.1% on the monthly basis. On the other hand, the U.S. has no releases.

EUR/CHF Technical Analysis for Dec. 6, 2011

EUR/CHF had a whippy day on Monday as traders first reacted to the meeting between Merkel and Sarkozy with relief. The meeting supposedly has formed a framework for fiscal union in the EU, and this is what the markets have been waiting for. With this in mind, the pair rose in value during the earlier part of the session. However, during the US afternoon, the ratings agency S&P was rumored to be putting all of Europe’s AAA-rated countries on “Credit Watch Negative”, meaning that a downgrade could be coming for some of the region’s strongest economies. The idea of a Germany, Finland, or France losing their rating would weaken the concept of a “super bond” that so many are looking for. This would certainly punish the EU in many unforeseen ways. The pair has been stagnant over the last couple of months since the Swiss National Bank put in a “floor” of 1.20, and the market has abandoned the once great one-way trade south. The selling of this pair is going to be difficult to do over the long-term as the SNB looks more than willing to get involved. The owning of the Euro is very difficult at the same time, and because of this – we are presently calling this a “scalper’s market”. The recent range of 1.20 – 1.25 should continue to be the boundaries for this pair, with the 1.20 being avoided like the plague. Because of this, we are basically seeing most of the trading in a 200 pip range above that bottom. The trading of this pair for the long-term will be best served when the EU gets the debt crisis under control. This pair is set to possibly rise again anyway, as it is rumored that the Swiss National Bank is thinking of raising the “floor” form 1.20 to the 1.25 level and then perhaps to 1.30 in the end. The owning of this pair on the buy side could eventually be the trade of your career, but we need to see a reason to own the Euro first.

EUR/CHF Forecast Dec. 6th, 2011, Technical Analysis

EUR/CHF Fundamental Analysis for Dec. 6, 2011

The EUR/CHF started the week with upside bias as the risk appetite started to gradually return to the market with the announced austerity package from Italy and Merkel and Sarkozy’s agreement on a plan to stem the crisis. We can see investors hopeful that Europe this week will present new and expanded measures that are strong enough to contain the crisis and expecting much from the ECB and also the EU leaders. This sentiment supported the euro especially with eyes ahead at the CPI from Switzerland on Tuesday and fears of rising deflation threats that might trigger a new SNB move to weaken its currency. On Tuesday the main event will be the Swiss inflation data as further signs of deflation will be the trigger to markets to start pricing a new move from the SNB and can further weaken the franc. As of 08:15 GMT, the Swiss economy will release CPI for Nov. where the reading is predicted to record -0.4% from the prior -0.1% on the year while rise to 0.0% from the previous -0.1% on the monthly basis. On the other hand, the U.S. has no releases. The euro zone will start the session at 10:00 GMT with the GDP figures for the third quarter in a preliminary reading, where the quarterly and annual seasonally adjusted indexes could have lingered at 0.2% and 1.4% respectively, noting that the Household Consumption index previous reading was 0.2% drop, while the Gross Fixed Capital was at 0.2%, in the time Government Expenditures dropped by 0.2% previously. Germanywill join the session at 11:00 GMT with the Factory Orders index for October, where the annual non-seasonally adjusted index could have expanded by 1.8% compared with the previous expansion of 2.4%, while the monthly seasonally adjusted index is predicted to expand by 1.0% from the previous drop of 4.3%.

AUD/USD Technical Analysis for Dec. 6, 2011

AUD/USD rose a bit during the Monday session, but mainly appeared somewhat lost and directionless. The pair has seen strong gains recently, and as a result – this positive day is more impressive than the candle would suggest. The pair is going to be sensitive to the headline risks out there, so sudden moves could be coming. The 1.03 level continues to work as resistance currently, and as a result we are looking to see if the pair can close above it. If we get weakness in that area, we wouldn’t hesitate to sell at that point as the moves have been overdone recently. The gap from two weekends ago hasn’t been filled yet, and that is something to consider as well if we get bearish momentum. Until we see a close above 1.05, we won’t be buying this currency as the headline risks will continue to flow and the Chinese economy is starting to slow down. The Aussie are heavy exporters to China, so the two economies are linked very tightly. The trouble in China will certainly hurt the Aussie if it picks up. The downside sees the parity level as potential support, and if we fall below the hammer from the Thursday session we could see a run to it. The level would have us thinking about taking profits or at least setting stops at breakeven. The breaking below of the parity level would have us even more bearish if we get a close below it. We prefer selling the rallies, as we just don’t see a scenario that suggests that the “risk on” trade should be piled into. The Aussie will suffer because of the global concerns, and not of their own doing unfortunately. It should be noted that the Aussie has been stronger than its cousin the Kiwi, and we expect that to continue to be the case going forward. With this in mind, when the markets fall strongly, we will prefer looking at selling the Kiwi as a “safety trade”. The Aussie will fall as well, but the recent action suggests that it will put up much more of a fight.

AUD/USD Forecast Dec. 6th, 2011, Technical Analysis

AUD/USD Fundamental Analysis for Dec. 6, 2011

The AUD/USD pair traded in a narrow range early Monday after the pair hit its highest level in almost three weeks, as the US dollar lost ground against most of its major counterparts. The Australian dollar advanced as a high-yielding currency against the greenback, after the cheerful news regarding the U.S. unemployment rate which came better than expectations and dropped to 8.6%. The American data helped the risk appetite to dominate the market and reduced demand for safe haven currencies such as the US dollar. On the other hand, the new Italian plan to cut the nation's debt increased confidence in the financial market. On Tuesday, the Australian economy will issue the Current Account for the third quarter, where it's expected to show a narrowing deficit of A$5600 million compare to the previous deficit of A$7419 million. At 03:30 GMT, the Reserve Bank of Australia will announced the interest rate decision, where it's expected that the central bank will keep the rate steady at 4.50%.

USD/CAD Technical Analysis for Dec. 6, 2011

USD/CAD had a relatively quiet day on Monday. The pair is highly sensitive to the oil markets as the Canadians export so much to the United States. The pair is often used as a proxy for oil by currency traders and as the oil markets were back and forth – so was this pair. The biggest problem with trading this pair is that the two economies are so intertwined. The Canadians export over 80% of their goods to the US, and as the US economy goes, so does the Canadian one eventually. However, the pair does move quite suddenly once it breaks out of the common consolidation that this pair sees. Currently, the 0.99 to parity level is massive support for this pair. As long as this pair can stay above that level, the bias is going to be to the upside over the long run. The US dollar and its “safe haven” status will continue to favor the Dollar as long as the world is so concerned with the situation in Europe, and the job markets continue to be soft in the USA. The trading world will buy Treasuries when the recessions hit, and as a result will be buying Dollars. There is massive resistance in the 1.05 area, and that is where we will need to break through in order to get a serious rally going in this pair. Although we feel that the pair will have an upward bias, it looks like this pair could be range bound for the foreseeable future. Perhaps we will have to retest that area several more times before escaping the range. The Monday candle is a hammer, and is sitting just above the 1.01 level, which has shown us some minor support lately. Although we don’t think of it as a major area, the breaking to the upside from the Monday range will be a very bullish sign as the buyers will have clearly been stepping in at that level. We don’t like selling, at least until we break below the 0.99 level, a couple of hundred pips below where we sit presently.

USD/CAD Forecast Dec. 6th, 2011, Technical Analysis

USD/CAD Fundamental Analysis for Dec. 6, 2011

The USD/CAD pair fell to the downside on Monday, where optimism spread through global financial markets ahead of the ECB meeting and the EU summit later this week, where investors were hopeful that EU leaders can craft a plan to ease the worsening debt crisis inEurope. The USD/CAD pair could fluctuate heavily on Tuesday, where the Bank of Canada will announce its decision on interest rates, as the BOC is expected to leave rates unchanged at 1.00%, yet investors will be eyeing the accompanying statement for clues over the BOC’s monetary policy path. Traders will continue to monitor the developments from Europe regarding the debt crisis, where reports suggest thatGermanyandFrancereached an agreement on a plan to ease the European debt crisis. Nonetheless, tensions remain elevated in financial markets, as investors are concerned that EU leaders will fail to reach an agreement again after suffering similar disappointments over the past few months. The USD/CAD pair could still drop if the current wave of optimism continues to dominate markets, but we still expect volatility to continue to dominate trading, as uncertainty remains the dominant theme in markets, and that could also lead to high levels of fluctuations for the USD/CAD pair. Tuesday December 6: Canadawill release the building permits index for October at 13:30 GMT, where building permits fell in September by 4.9%, and projections show building permits increased by 1.6% in October. The Bank of Canada will announce its decision on interest rates, where the BOC is expected to leave the benchmark interest rate unchanged at 1.00%. The Ivey PMI for November will be released at 15:00 GMT, which is expected to rise to 55.0 from 54.4 in October.

NZD/USD Technical Analysis for Dec. 6, 2011

NZD/USD had a very, very, very quiet day on Monday. The pair is highly correlated with the commodity markets, and as such reacted very mildly to a fairly quiet day in that trading environment. The Kiwi is presently one of the favorite pairs for the bulls worldwide, and as a result will always have at least some kind of bid under it. However, the pair has recently made a new swing low, and hasn’t filled the gap from two weekends ago. Because of this, a fall is probably coming soon. The 0.8000 level would have to be broken to the upside for us to be convinced otherwise. The “risk off” environment we find ourselves in has us doubting that this pair will manage that feat in the near future. With this in mind, we are actually bearish this pair, but waiting for some kind of confirmation. The breaking of the hammer from Thursday to the downside is what we are waiting to see before shorting this pair. The market moving lower than that level would should significant support eroding, and this would more than likely has the pair continuing the downtrend that we have seen over the last several months. The pair is going to be very sensitive to the headline risks out there presently, and as a result it is one of the first pairs we sell when bad news is released. The pair is a fairly illiquid pair, and as a result we could see exaggerated moves considering we are getting closer to the holidays and the volumes in general should be lighter the longer we get into the month of December. Not until we see a daily close above the 0.8000 level would we consider buying this pair. The global risks are currently far too great to consider it now, and as a result we still prefer to sell rallies as long as we are under that level, or selling the above mentioned breaking of support from the Thursday session. The closing above 0.8000 would have an effect of a short-term trend change again, so anything above there has to be taken seriously.

NZD/USD Forecast Dec. 6th, 2011, Technical Analysis

NZD/USD Fundamental Analysis for Dec. 6, 2011

The NZD/USD pair was little changed with the beginning of the week, as it traded near its highest level in two weeks after the US dollar dropped against most of its major counterparts last week. The federal currency lost ground against other major last week due to the improved risk appetite which increased demand for higher-yielding currencies, where the U.S. unemployment rate dropped unexpectedly during November to 8.6% supporting the confidence in the market. As for the EU debt crisis update, the new Italian prime minister announced a plan to cut the ongoing nation's debt which also uplifted hopes as investors’ confidence is rising on hopes that the EU summit this week will deliver strong measures to contain the crisis. The Italian plan in addition to the cheerful U.S. data helped risky assets and accordingly supporting equities and commodities alongside the New Zealand dollar. Both economies will not release any fundamentals on Tuesday, where the pair's movements will depend on the market sentiment.